Johnson & Johnson’s Quality Catastrophe
Individual Case Study Analysis

Johnson & Johnson is a multinational medical devices, pharmaceutical, and consumers packaged goods manufacturer founded in 1886. Until 2005, this corporation ranked at the top of Harris Interactive National Corporate Reputation survey, and was also ranked as the world’s most respected corporation by Barron’s Magazine. This global corporation is made up of 250 subsidiary companies with operations in over 57 countries and products sold in over 174 countries. Due to product recalls, fines for pharmaceutical marketing practices, litigation with shareholders, and other legal issues, Johnson & Johnson’s reputation has been adversely affected in recent years.
SWOT Analysis
Strengths
Johnsons & Johnson is a corporation that has achieved economies of scale and scope. It has a strong global presence represented by over 250 subsidiary companies operating all over the globe. Overall, it has an excellent product portfolio and high quality offerings that satisfies consumer needs on a daily basis. This corporation has placed a huge emphasis on establishing a strong customer base, with recognition for brand loyalty and image. Johnson & Johnson has been a leader in pharmaceuticals and medical devices, which accounts for almost 80% of the corporation’s total revenues. One of its major strengths is the importance of the pharmaceutical and medical advances the company has contributed to society. Some contributions made by this global giant include immunology products that are used in the treatments of autoimmune disease like Crohn’s, Ulcerative Colitis, and rheumatoid arthritis, amongst other disorders. They have also been on the cutting edge in the development of key infectious disease products like Incivio used for hepatitis C, as well as Intelence and Prezista used in HIV treatment. Other strengths that this corporation holds is its place as one of the World’s Most Admired companies. In 2011, Johnson & Johnson was awarded the Humanitarian of the Year Award by the United Nations for its leading role in its Healthy Mother, Health Child initiative. Its brand presence in the form of advertising media and print media for its various products has contributed to the company being adored and trusted by mothers all over the world. Since the inception of the list some 26 years ago, Johnson & Johnson has been ranked amongst the “Top 100 Companies for Working Mothers”. Johnson and Johnson is a leader in necessary every day consumer products made available to the public with high quality brand recognition like those of Band-Aid, Neutrogena, Listerine, Baby Shampoo, Acuvue Lenses, Purell, and much more. Although Johnson & Johnson can make such important contributions to society, some of these contributions have become weaknesses to the company due to various reasons.
Weaknesses
Maintaining such a global brand has many strengths and advantages, but being exposed to so many risky products can leave a corporation exposed to plenty of weaknesses. Maintaining a global brand can be problematic in many ways, one of which can be the oversight of retailers who may tarnish the reputation by selling expired products. Product recalls, which have plagued Johnson & Johnson, are also weaknesses to a global corporation of this size. One of the subsidiaries had to willingly recall 43 over-the-counter children’s medicines, including Benadryl, Tylenol, Motrin, and Zyrtec. In the article, we read about a former Marine Corps officer who had previously received hip replacement surgery. The ASR hip used, a product developed by one of Johnson & Johnson’s subsidiary companies DePuy, was being promoted as touch and durable, making it perfect for younger, physically active patients. These hips were eventually recalled because of the pain and discomfort it caused in over 90,000 patients around the world. Such recalls are worrisome to both customers and stakeholders, as they may be symptoms of a systematic quality-control problem at Johnson & Johnson. These are just a few examples of over 50 voluntary product recalls issued since the start of 2010. With all the problems the corporation has been facing in the past decade, I have concluded that the large size of the corporation may contribute to its weaknesses. Johnson & Johnson’s weaknesses also include a shrinking demand in its key products. The corporation is also facing strong pressure to reduce prices and preserve copyright expirations on many of its products. From its financials, the company’s major revenues also depend heavily on certain drugs like Risperdal, and antipsychotic medication, or CNS treatment medications. The pharmaceutical giant has a lot invested in what could be described as a small percentage of its overall operations. The Antipsychotic medication, Risperdal, has caused plenty of nightmares for Johnson & Johnson, as they have been found guilty in several US states for hiding what they knew about its adverse effects, in order to promote it to doctors and patients as better than cheaper generics. The company has also been investigated by the United States Department of Justice for the use of this medication, initially used for the treatment of schizophrenia, in the treatment of dementia through companies that supply pharmaceutical drugs to nursing homes. Johnson & Johnson has been exposed numerous times, leading to multiple investigations, large numbers of lawsuits, and litigation which seems to come with the territory when dealing with a large quantity of diverse products and subsidiaries.
Opportunities
Catering to a large number of consumer needs provides Johnson & Johnson with a lot of opportunities to expand both nationally and globally. A major opportunity that such a large scale corporation can have is its ability to procure smaller companies and increasing its broad brand presence. Johnson & Johnson also has the opportunity to increase market share by product development and product innovation globally. The corporations’ vast resources, both from a technological and logistical perspective, can allow for the development of more portable products for economy class consumers, thus increasing its outreach to underserved populations. Through increased research and development efforts, Johnson & Johnson can also tap in to the production of pharmaceuticals for deadly diseases and infections that have caused serious epidemics worldwide, like the current spread of Ebola in West Africa. Another opportunity can be to refocus and reach out to new consumers, by providing alternative products for lower prices. With such a large sized corporation, Johnson & Johnson can find ways to produce more affordable products to those who can’t afford the top brand names, limiting the amount of revenue that the competitors have taken away from them in certain markets.
Threats
In the wide variety of products the corporation holds, it has become much easier for competitors to provide alternative and substitute products at more affordable prices. When walking into any department store carrying Johnson & Johnson products, you can find its product placed on a shelf next to multiple competitors’ products that provide the same item at a lower price. However, this threat does not hold to just your everyday items at your local department or convenience store. The pharmaceutical division has become one of the most competitive markets around the globe. With many scientific and technological advances today, it has become a global race for who can cure the many existing terminal diseases. Johnson & Johnson competes with other large pharmaceutical corporations, like Pfizer and Roche Holding, for the development of effective treatments of serious illnesses like cancer. Competition in such sensitive areas can pose a large threat to a company, making it susceptible to a lot of negativities as a large number of drugs being released to treat such illness have been deemed unsuccessful for the most part. Also, as we have read excessively about Johnson & Johnson, with riskier items comes lawsuits and failures. Another threat to Johnson & Johnson is the multiple legal problems that it has faced over the years. This series of negativity has harmed the public opinion of the corporation, and with the large availability of news media to the public, increased awareness of these problems have threatened its operations. Subsidiary companies being mismanaged, guaranteeing unattainable promises, unable to compete with cheaper generics, and using unethical marketing strategies have placed a black cloud over the head of this global giant.
Environmental Scan Politics In a heavily regulated market, pharmaceutical companies have faced a tremendous amount of federal oversight, legislation, and government regulation. The politics on local, regional, national, or international scales can exert strong forces of businesses. Being that Johnson & Johnson operates worldwide, political developments that may affect the business must be continuously tracked. In the industry in which companies such as Johnson & Johnson operate, there is a large amount of political spending, lobbying, and contributions made to campaigns in order to place a favorable delegation in high office. According to Americans for Campaign Reform, pharmaceuticals have invested nearly $2 billion in campaign contributions and lobbying efforts. From 1990 to 2008, individuals, lobbyists, and political action committees in the industry have contributed $167 million to federal candidates. In 2008, members of the House and Senate received an average of $25,277 and $81,891, respectively, in political contributions. Apart from campaign funding, the pharmaceutical industry has also made contributions pegged to key legislation. Industry contributions rose to $29.6 million prior to Congressional approval of the Medicare Modernization Act of 2003, which featured the $400-$600 billion Medicare Part D prescriptions program. After the passing of the Medicare Modernization Act, 15 members of Congress, congressional staff, and federal officials involved in the passing of the bill accepted jobs as pharmaceutical lobbyists, including former Medicare director and the chair of the House Energy and Commerce Committee. Demographics This industry appeals to every single demographic in one way or another. Everyone from pediatric care all the way to geriatric care is in need of medication at some point or another, whether it be prescription or over-the-counter. Also, with the diverse amount of products produced by subsidiaries, large corporations such as Johnson & Johnson can cater to all demographics. However, with a large emphasis on the pharmaceutical industry, Johnson & Johnson serves and will continue to serve the largest generation on the planet, the baby boomers. The baby boomers are projected to require the most care in facilities like nursing homes, and a subsidiary of Johnson & Johnson is the largest provider of prescription medications to nursing homes across the nation. Corporations in this industry also possess access to demographics around the globe, as their products and operations are often found in various countries around the globe.
Economic
This environment is extremely important for such large corporations as Johnson & Johnson to track, as it can change instantaneously. Johnson & Johnson’s continued expansion into the European Union, and other large markets provides evidence that the corporation needed to seek opportunities to remedy the effects of the economic crisis in America. It is important to predict when a corporation may face challenges, and Johnson & Johnson was able to do so well ahead of time in order to plan for its impact. Often times, predicting the economic environment can lead to the seizure of opportunities that may not be always available. Companies like Johnson & Johnson have been fortunate enough to not experience severe setbacks from the economic crisis, as medical products remain necessities even in periods of economic downturn. The passing of the affordable care act will contribute heavily to the success of these industries, as a larger number of people will soon have access to prescription drugs who may not have been able to afford them before.
Socio-Cultural
The aging population across America will provide tremendous opportunities to the medical industry in the years to come. With the large baby boomer generation approaching the age where they begin to need a lot of care, a huge social and economic impact will be experienced globally. The influx of senior citizens will create huge demands throughout the different realms of medical care. Companies like Johnson & Johnson can expect to see an increase in sales across its pharmaceutical, medical devices, and diagnostics segments for many years to come. Also, a large part of the Johnson & Johnson culture is its appeal to mothers across the world. They have used this marketing strategy for such a long time that the generation with the largest purchasing power has grown attached to this trusted provider. There are a lot more social and cultural aspects that will affect this industry in both a negative and positive way. However, this industry remains vital to our society because it provides cures to illnesses, comfort to pain, replacement for lost limbs, and other remedies to make our everyday lives easier and better.
Environmental
In Newsweek’s “Green Rankings”, Johnson & Johnson was ranked third amongst the United States largest companies for its continued effort to keep the company environmentally friendly. It is important for all companies in this industry to maintain environmentally friendly efforts, especially when tied in to the health and wellness categories. Johnson & Johnson agreed to change its packaging of plastic bottles in the manufacturing process, switching their packaging of liquids to non-polycarbonate containers. Industry leading corporations have also found ways of reducing water usage, waste production, and energy usage. Johnson & Johnson operates the largest solar power generator at its Spring House, Pennsylvania site.
Alternative Strategies There are a few alternative strategies that the Johnson & Johnson Corporation may implement in order to provide more reliable service and products. With the vast majority of subsidiary companies under their umbrella, it would be beneficial for the corporation to increase management oversight of the daily operations of their subsidiaries. This will allow for more control on what the smaller companies are doing and disallowing the Johnson & Johnson name to be tarnished. Secondly, the corporation is in the market for a large variety of products. With such a wide variety of products that hold significant importance, it leaves for a large margin of error. I believe that Johnson & Johnson needs to take more time and pay more attention to product research and development. In the pharmaceutical industry, companies are too occupied with being the first to develop a product that they are often left with low quality. I believe that the manufacturers of important illness curing medication and life altering devices should take more time developing the best products rather than worrying about strictly being first. Being first is often good for the company, but in the long run, being the best and most innovative will pay off better. Combined with the first alternative strategy, increased oversight and regulation means the subsidiary will not release a product that the corporation does not fully approve of. Finally, I believe that Johnson & Johnson needs to refocus and restructure the organization to what they once stood for. I believe that with all of the recent distractions, the corporation has lost sight of its vision and mission statement.